EDITOR’S NOTEBOOK: Four perspectives on 2018

When Brad Davis looks ahead to 2018, he gets very excited about the future of his company, Zeeland-based Industrial Woodworking Corp.

The manufacturer’s MedViron division, a brand of furniture for health care environments, has been gaining steam in the marketplace, earning recognition from customers and competitors alike for its innovative, high quality products.

“I’ve never been as excited, even when we were just starting as a company,” he said. “I don’t believe I’ve worked this hard since I first started the company, either. It is foot-to-ass all day long, every day.”

It’s been about a decade since I first met the ever-quotable and gregarious Davis, an industrial designer and entrepreneur who wears his heart on his sleeve. He’s opinionated and frank, but in a way that breaks the mold of a stereotypical Zeeland industrialist.

In other words, he’s just the kind of person I put on my list to talk to for an end-of-the-year gut-check for the annual Crystal Ball edition of MiBiz.

Back in November, I gave myself an assignment that would allow me to meet with a smattering of executives from all over West Michigan to get a pulse on where they see the economy and their businesses as the calendar inches ever closer to 2018.

Here are their stories.

GOING DEBT-FREE

Industrial Woodworking Corp. has carved out a niche as a contract manufacturer of wood casegoods for the office and health care furniture segments.

While the Zeeland-based company long served as a Tier 1 supplier to various big furniture OEMs, Davis out of necessity had to reinvent the business about five years ago, around the time the provisions of the Affordable Care Act kicked in and his business ground to a screeching halt.

Davis recalls some “pretty dark” times after the the ACA upended hospitals’ spending for items like furniture, throwing his company into standstill.

That led to the creation of MedViron, a line of overbed tables, bassinets, casegoods and other health care furnishings.

After returning from a health care design show in November, Davis said the positive reception and orders show the company’s investment in the brand is starting to pay off with real cash flow.

“Fortunately, I’m not a publicly held corporation so I don’t have stockholder equity challenges that I have to deal with,” he said. “I can go ahead and take the long approach and say I can lose money for a year or two or breakeven — which is what we did basically, just breaking even for a couple of years.

While he’s bullish about his company, Davis keeps watching the overall economy and the unbridled growth in the stock market with healthy suspicion. The same goes for the financial industry, which explains why he also sought to take control of the company’s financial destiny.

“I have no financing at all — none,” he said. “We have no debt, even on our physical plant. Our last two major pieces of equipment, which were CNCs that are well over $100,000 each, we bought those with cash.

“We’ve just developed a business and products that we can scale up or down depending on the economy. We can still be here and we’re not going to be crushed by a level of debt that is unserviceable when the economy goes south.”

As for the ACA, the law that changed the course of his business when orders dried up from his OEM customers: Davis said the pain his company and his industry went through was worth it because it meant millions of people received access to health care who previously could not afford it.

“I’m just one guy, and there’s 35 million people out there that have care. That’s a lot bigger than me,” he said. “That’s what made our country great, that we cared about each other.”

The loquacious Lott took to social media to call out the number of mentions of the word “uncertainty,” which executives cited as driving their outlooks for 2017.

Lott didn’t buy it then, and still doesn’t today.

“I suspect there are ways to be certain or to have certainty in your life, but owning a business, to me, never seemed to be the way to do it,” he said.

When asked if he thought business execs use uncertainty as an excuse for not having to take a stand on the record, Lott said: “Call it what you will, I just don’t understand.”

Fair enough, so I teed up the question we’ve asked hundreds of executives again this year for Crystal Ball: What’s your outlook going into next year?

“I think we’re bullish,” Lott said. “I feel like we still have a lot of capacity in our local market. I think there’s still a ton of great work that needs to be done. I hope that we’re going to be able to do some of it. At a very basic level, I have to be optimistic.”

Lott3Metz is coming off a year in which it’s seen movement on several “flagship projects,” including the Museum School at 54 Jefferson Ave., the site of the former Grand Rapids Public Museum, as well as the future home of the West Michigan Center for Arts & Technology as part of Rockford Construction’s “super block” development on the city’s west side.

The company’s focus is inherently local, with most of its projects coming within the Grand Rapids city limits. As such, Lott said policy and leadership at the local level most shape how his company does business.

That’s why he’s “hugely concerned” about two executive vacancies within the city bureaucracy, for city manager and leadership at Downtown Grand Rapids Inc., which administers the city’s Downtown Development Authority.

“That will absolutely affect our day-to-day operations, because we deal with the city every day,” he said. “We’re very hopeful for change in the city and we’re looking forward to it, but it absolutely will require us to change the way we do some things. Those are two really big leadership changes in the city right now that will absolutely affect our work.”

As an urbanist, Lott also would like to see cities like Grand Rapids control more of their own destinies, which would require state government “walking away from all of the regressive, anti-city policies” it’s enacted in recent years.

“Grand Rapids needs to be able to have a sales tax so we can fund transit. The state won’t allow us to do it, and that needs to be changed,” he said. “If we decide we want inclusionary zoning, we should be able to have inclusionary zoning. If we decide we want to ban plastic bags, we should be able to ban plastic bags. That kind of crap from the state government is bullshit.

“The real issue is, get your hands off our stuff. It’s just ridiculous. I’d much prefer them to allow us to govern our city the way we see fit.”

PEOPLE PERSON

Next year will mark the 99th year in business for JSJ Corp., a third-generation closely held diversified manufacturing business based in Grand Haven.

That intertwined corporate and family legacy weighs on Chairman, President and CEO Nelson Jacobson, as he observes the current nationalist rhetoric coming out of Washington, D.C.

“I am three generations removed from Sweden,” he said, referencing his grandfather, Alvin Jacobson Sr., who co-founded what would become JSJ Corp. with Paul Johnson in 1919. The business today includes local companies GHSP Inc., Izzy+ and Dake Corp.

“My grandfather and Mr. Johnson, they were Swedish immigrants, so I don’t know what right we have today to say people can’t come in,” Jacobson said. “We are a nation of immigrants. The Statue of Liberty says, ‘Give me your tired, your hungry, your poor’ and I just don’t know why we have a right to say, ‘No, we’re closing the doors now.’”

Jacobson acknowledges the need for the country to protect its borders and to have rigorous vetting in the immigration and refugee process, but he dismisses as “an easy political statement” the notion that immigrants — whether legal or otherwise — are taking jobs away from American workers.

With much of the country at near full employment and companies struggling to find skilled workers, it doesn’t make much sense to restrict the labor pool even more, he said.

“It’s a global marketplace, it’s a global need for talent. I think it’s very, very short sighted.”

He uses the example of Hudson Technologies, a Daytona Beach, Fla.-based division of JSJ Corp. that specializes in tooling and forming for hard metals like titanium. The company has had success hiring from the area’s refugee and immigrant population, including displaced skilled tradesmen from Guatemala, Ukraine, Czech Republic and Slovakia.

“There’s 20 different nationalities working on that floor,” Jacobson said. “We have a map down there, and there’s pins all over the place. We’re getting this great talent, but you have to embrace they’re all these different (cultures).”

Jacobson draws similarities between the immigration debate and the trade protectionism surrounding the Trump administration’s calls to repeal NAFTA.

“Does it need to be evaluated? Are there things that we learned that should be different? Of course,” he said. “But this idea that we’re somehow taking jobs, I think it’s really a misnomer. Tell me what’s specifically wrong and imbalanced. I just think it’s a very naïve view.”

His prediction is that NAFTA will be preserved after the “highly declarative statements” fade into the Twitterverse.

Despite the unknowns, Jacobson is struck by the strength JSJ Corp. continues to demonstrate as he looks ahead to 2018, particularly as the company comes off growth in the “high teens” and a highly profitable business this year. Couple that optimism with federal tax reform that will create “more free investable cash flow” and it makes for another bullish forecast.

“What’s really exciting about that is next year’s going to be another very, very strong year,” he said. “Business is just really strong, and it’s strong here in Michigan, it’s strong nationally, and it’s strong globally. I just think that gets lost.”

REVVED UP

While it may seem counterintuitive, ADAC Automotive President and CEO Jim Teets is fired up for what will be a down year in 2018 at the supplier of automotive door handles and exterior mirrors.

He projects sales for the Grand Rapids-based company will be down 7 percent next year, an anticipated blip resulting from the vehicle platforms ADAC supplies and where they are in their life cycles.

“We knew it was coming — it was a huge launch year for us,” Teets said.

Still, he bases his optimism on where ADAC sits today, and how far the company’s come since essentially breaking even in 2009 at the depths of the recession for the automotive industry when the company’s future looked decidedly bleak at times.

In particular, the company is ramping up to supply a new high-volume General Motors contract for the redesigned platform that underpins everything from the Silverado/Sierra pickup trucks to SUVs like the Chevy Tahoe and Suburban, the GMC Yukon and Yukon XL and the Cadillac Escalade.

For the first time since the pain of the downturn, Teets’ outlook has turned from measured positivity to outright exuberance.

“We’re having our best year in our 42-year history, with record sales and profitability,” Teets said, crediting the company’s investment in improving its lean manufacturing operations with accelerating its performance. “Sales blew past the budget by 30 percent, and with the lean work we’ve done, that’s allowed the additional sales to move even more to the bottom line.

“I will have been with ADAC for 25 years in March of ’18. I’m truly excited about next year.”

Part of that excitement stems from the unprecedented period of investment ADAC has planned for the coming years that he teased will reshape how the company will be able to attract talent. More on that to come, he said.

Teets’ upbeat outlook also hinges on the company executing on major supply chain opportunities with its global manufacturing footprint, which spans Michigan, Mexico, China, India and Brazil through various partnerships and alliances.

But still, the company will need to remain disciplined in 2018 because of the off year, Teets added, noting ADAC plans to add fewer than 10 salaried positions next year.

Not even talk of tearing up NAFTA can stanch his optimism. While the supplier operates two plants in Mexico, Teets notes that most of the components from Silao and León ship in-country to OEM customers.

“We serve our customers with our footprint,” he said. “There will be changes and we might have to pay a tariff or something, but I don’t think we’ll be materially affected by any changes with NAFTA.”

He’s also betting that, given the way Washington, D.C. operates these days, any action on NAFTA will likely fail to live up to the heated rhetoric.

“Trump’s barking and sending a strong message, and then Wilbur Ross and the rest of his team have to get to work on the ground,” Teets said. “I think what gets negotiated is less than his bluster.”